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R&D Investment and Productivity: A comparative study of Japanese and Korean firms

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  • YoungGak KIM
  • ITO Keiko

Abstract

In this paper, using a large-scale dataset covering both Japanese and Korean firms, we examine the differences in performance and research and development (R&D) activities between them. We find that Japanese firms tend to be more productive in terms of total factor productivity (TFP), and that the productivity gap has not been narrowing in most industries. However, Korean firms are superior in terms of labor productivity and profitability. On the other hand, in recent years, Korean firms on average have tended to have a higher R&D intensity. In particular, smaller Korean firms have been actively increasing their R&D expenditures. We also find that the rate of return on R&D for large/productive firms is much higher in Korea, while that for small/less productive firms does not significantly differ. The relatively low rate of return for small/less productive firms may explain why Korea's average TFP level is not catching up with that of Japan. On the other hand, the rate of return on R&D for large firms is low in Japan, warranting further investigation on the factors underlying this.

Suggested Citation

  • YoungGak KIM & ITO Keiko, 2013. "R&D Investment and Productivity: A comparative study of Japanese and Korean firms," Discussion papers 13043, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:13043
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    File URL: https://www.rieti.go.jp/jp/publications/dp/13e043.pdf
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    References listed on IDEAS

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    1. Bellone, Flora & Kiyota, Kozo & Matsuura, Toshiyuki & Musso, Patrick & Nesta, Lionel, 2014. "International productivity gaps and the export status of firms: Evidence from France and Japan," European Economic Review, Elsevier, vol. 70(C), pages 56-74.
    2. Inha Oh & Almas Heshmati & Chulwoo Baek & Jeong-Dong Lee, 2009. "Comparative Analysis Of Plant Dynamics By Size: Korean Manufacturing," The Japanese Economic Review, Japanese Economic Association, vol. 60(4), pages 512-538.
    3. Tomohiko Inui & Hyeog Ug Kwon, 2005. "Nihon seizogyo ni okeru R&D katsudo to seisansei: Kigyo level data ni yoru jisshobunseki (in Japanese)," Hi-Stat Discussion Paper Series d05-122, Institute of Economic Research, Hitotsubashi University.
    4. Kyoji Fukao & Tomohiko Inui & Keiko Ito & Young Gak Kim & Tangjun Yuan, 2011. "An international comparison of the TFP levels and the productivity convergence of Japanese, Korean, Taiwanese and Chinese listed firms," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 9(2), pages 127-150.
    5. Jorgenson, Dale W. & Kuroda, Masahiro & Nishimizu, Mieko, 1987. "Japan-U.S. industry-level productivity comparisons, 1960-1979," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 1-30, March.
    6. Bartelsman, Eric J & Haskel, Jonathan & Martin, Ralf, 2008. "Distance to Which Frontier? Evidence on Productivity Convergence from International Firm-level Data," CEPR Discussion Papers 7032, C.E.P.R. Discussion Papers.
    7. Johannes Van Biesebroeck, 2007. "ROBUSTNESS OF PRODUCTIVITY ESTIMATES -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 55(3), pages 529-569, September.
    8. Almas Heshmati & Hyesung Kim, 2011. "The R&D and productivity relationship of Korean listed firms," Journal of Productivity Analysis, Springer, vol. 36(2), pages 125-142, October.
    9. Moosup Jung & Keun Lee, 2010. "Sectoral systems of innovation and productivity catch-up: determinants of the productivity gap between Korean and Japanese firms," Industrial and Corporate Change, Oxford University Press, vol. 19(4), pages 1037-1069, August.
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    Cited by:

    1. Min, Byung S. & Smyth, Russell, 2014. "Corporate governance, globalization and firm productivity," Journal of World Business, Elsevier, vol. 49(3), pages 372-385.

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